Member states find the road to unity paved with good intentions

Date: 12/12/1996

A GROUP of enthusiastic MEPs boarded a cross-Channel ferry just before midnight on 31 December 1992 to celebrate the arrival of the single market twice - once in France and once in the UK - by taking advantage of the time difference.

Almost four years later, those celebrations are memories, the time difference remains and reflections on the internal market's successes and failures have begun in earnest.

The single market is still one of the few rallying calls which unites all member states behind the EU banner and attracts a queue of aspiring entrants to the trade bloc.

But many Union governments, and the European Commission itself, are now being accused of paying lip-service to internal market principles rather than actually putting them it into practice.

If those same MEPs were to hold a fourth anniversary celebration in three weeks' time, the talk over drinks might well turn to Sweden's refusal to give up its limits on duty-free alcohol, the UK's guest beer laws or France's ban on advertising alcoholic drinks.

These are just some of the numerous ongoing single market cases which are crowding Internal Market Commissioner Mario Monti's desk.

Critics accuse the atypical Italian of delaying difficult decisions on a series of thorny political dossiers, such as media pluralism, pensions reform, public procurement and uniform advertising rules.

All are currently waiting for firm Commission proposals for action after it has completed the traditional process of casting around for opinions.

Monti has, in turn, taken to delivering an almost monthly lecture to member states for dragging their heels in putting single market laws into effect, failing to apply them properly at home and ignoring the rules once they are on the statute book.

His complaints, once confined to meetings of EU ministers responsible for the internal market, made their way into the Florence summit conclusions in June this year, with a warning that the single market would not deliver as a catalyst for faster economic growth and more jobs unless governments played their part.

By October, Monti was back, singing the same sad song.

He pointed out that only 54.3&percent; of single market directives were in place in all 15 member states, with public procurement and insurance two of the biggest black holes. Greece has enacted so few recent insurance directives that the internal market in that sector has almost passed it by altogether.

Countries supposedly in the vanguard of European unity, such as Germany and France, can just as easily be found sharing the guard's van with Greece when it comes to taking a pick-and-choose approach to which single market rules they will apply and which they will ignore.

Faced with such intransigence from heavyweight Union countries, Monti has started to cast around for better armoury to bring backsliders to account.

“The instruments there are not very sharp,” comments one man who should know what real EU weapons are made of, Competition Commissioner Karel van Miert.

Although the use of infringement proceedings to bring recalcitrant member states into line has been stepped up, this has not been enough. There are now signs that some governments are contemplating changes to the EU treaty to beef up the Commission's powers.

The Commission itself has moved to overhaul its procedures for disciplining foot-dragging governments, with shorter deadlines for dealing with cases and embarrassing publicity for member states whenever infringement proceedings are launched against them.

To counter critics who claim that the myriad gaps in the internal market are significantly undermining its achievements, the Commission recently attempted to define the undefineable.

It published a report setting out the benefits of a (theoretically at least) border-free Europe for goods and services. The report suggested that the internal market had created between 300,000 and 900,000 new jobs, resulted in a hike in revenues of up to 1.5&percent; between 1987 and 1993 and a reduction in inflation of about 1.5&percent;. This, however, appears somewhat disappointing when compared with the forecasts made in the 1988 Cecchini report, which promised 4&percent; growth in EU gross domestic product and the creation of at least 2 million jobs.

Monti's retort is that full integration has still to take place - many single market measures were not passed by governments until 1994 and 1995 and have still to bear fruit for business.

But he is the first to acknowledge that significant gaps remain in the single market's legislative framework.

The European Company Statute, a type of off-the-shelf passport allowing companies to start up in other countries without the hassle of dealing with local regulations, is a political football which the Commission is trying to kick back into play. Officials believe it could save busi-ness an estimated 30 billion ecu a year.

Progress on aligning the different value added tax regimes in Europe has been frozen for the last five years, with rates allowed to float as high as they like above minimum levels.

A single Union tax regime is still a pipedream, although Monti is trying to get governments to agree on a united shift from taxing labour to taxing capital in a bid to create jobs.

Even in the field where the single market has had most success - liberating the flow of an essentially fluid commodity, money - there have been problems. Banks have been dissuaded from using their freedom to set up in other countries by prudential (read protectionist) national rules. The single insurance market has failed to take off for the same reason.

Victor Norman, professor of economics and trade at the Norwegian School of Economics, says the single market has lived up to most of its early expectations, but the Commission has proved more cautious than expected in pushing the programme forward.

Norman produced an independent study of the expected results of the single market in the early Nineties.

He believes that the biggest sign of success has been the dramatic increase in inward direct investment into the EU.

“At a micro level things are also moving very quickly, particularly in relation to the extent to which large European companies are relocating. That has been faster than expected,” he adds.

The next vital step in fulfilling the dream of a truly border-free Europe for goods and services, argues the Commission, is turning the single currency project into a reality.

Supporters of economic and monetary union insist that this is essential to the completion of the internal market. The euro's critics maintain it is not.

Norman is among those who argue that the speed of European integration into the internal market has not been fast enough to pave the way for a single currency.

“Most economists would say a single currency is, at the moment, far from being the natural counterpart to the single market...there is still a long way to go,” says Norman.

But Manfred Schneider, chairman of global chemical giant Bayer, warned last month that multiple currencies and the failure to complete the internal market was costing the industry billions of ecu a year.

He insisted that EMU was essential and should be introduced no later than 1 January 1999. “We believe the advantages will be so great, we cannot risk missing even one month after that,” he said.